17-0330 Thursday “The Daily Bugle”

17-0330 Thursday “Daily Bugle”

Thursday, 30 March 2017

TOPThe Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, Customs, NISPOM, EAR, FACR/OFAC, FTR/AES, HTSUS, and ITAR), plus news and events. Subscribe 
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  1. State Imposes Nonproliferation Measures Against 29 Foreign Persons 
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.) 
  3. State/DDTC: (No new postings.) 
  1. M. Volkov: “The Three Lines of Compliance Offense Versus The Three Lines of Compliance Defense” 
  2. U.S. Administration Exempts DDTC from Limit on New Regulations 
  3. Gary Stanley’s ECR Tip of the Day 
  1. ECTI Presents Making Lemonade out of Consent Agreements Webinar, 9 May 
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Changes: ATF (15 Jan 2016), Customs (27 Jan 2017), DOD/NISPOM (18 May 2016), EAR (29 Mar 2017), FACR/OFAC (10 Feb 2017), FTR (15 May 2015), HTSUS (7 Mar 2017), ITAR (11 Jan 2017) 


. State Imposes Nonproliferation Measures Against 29 Foreign Persons

82 FR 15780-15781: Imposition of Nonproliferation Measures Against Foreign Persons, Including a Ban on U.S. Government Procurement
* AGENCY: Bureau of International Security and Nonproliferation, Department of State.
* ACTION: Notice.
* SUMMARY: A determination has been made that a number of foreign persons have engaged in activities that warrant the imposition of measures pursuant to Section 3 of the Iran, North Korea, and Syria Nonproliferation Act.
* DATES: Effective March 21, 2017.
* FOR FURTHER INFORMATION CONTACT: On general issues: Pam Durham, Office of Missile, Biological, and Chemical Nonproliferation, Bureau of International Security and Nonproliferation, Department of State, Telephone (202) 647-4930. For U.S. Government procurement ban issues: Eric Moore, Office of the Procurement Executive, Department of State, Telephone: (703) 875-4079.
  On March 21, 2017 the U.S. Government applied the measures authorized in Section 3 against the following foreign persons identified in the report submitted pursuant to Section 2(a) of the Act: …
  Accordingly, pursuant to Section 3 of the Act, the following
measures are imposed on these persons:
    (1) No department or agency of the United States Government may procure or enter into any contract for the procurement of any goods, technology, or services from these foreign persons, except to the extent that the Secretary of State otherwise may determine;
    (2) No department or agency of the United States Government may provide any assistance to these foreign persons, and these persons shall not be eligible to participate in any assistance program of the United States Government, except to the extent that the Secretary of State otherwise may determine;
    (3) No United States Government sales to these foreign persons of any item on the United States Munitions List are permitted, and all sales to these persons of any defense articles, defense services, or design and construction services under the Arms Export Control Act are terminated; and
    (4) No new individual licenses shall be granted for the transfer to these foreign persons of items the export of which is controlled under the Export Administration Act of 1979 or the Export Administration Regulations, and any existing such licenses are suspended.
  These measures shall be implemented by the responsible departments and agencies of the United States Government and will remain in place for two years from the effective date, except to the extent that the Secretary of State may subsequently determine otherwise.
  Ann K. Ganzer, Acting Assistant Secretary of State for International Security and Nonproliferation.

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OGS_a12. Ex/Im Items Scheduled for Publication in Future Federal Register Editions

(Source: Federal Register)
* President; ADMINISTRATIVE ORDERS; Defense and National Security: Cyber-Enabled Malicious Activities; Continuation of National Emergency (Notice of March 29, 2017) [Publication Date: 31 March 2017.]

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OGS_a23. Commerce/BIS: (No new postings.)

(Source: Commerce/BIS

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OGS_34State/DDTC: (No new postings.)


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COMM_a15M. Volkov: “The Three Lines of Compliance Offense Versus The Three Lines of Compliance Defense”

Volkov Law Group Blog. Reprinted by permission.)
* Author: Michael Volkov, Esq., Volkov Law Group,
mvolkov@volkovlaw.com, 240-505-1992.
People crave simple solutions to complex problems. No, this is not a political statement, nor do I intend to wade into politics. This statement applies across the board – to business, compliance, government, and other institutions.  We all want to understand difficult issues and to gain that understanding without the hard work that is required to learn a complex issue, consider alternatives, and develop possible solutions.
In the compliance arena, we often hear about the “three lines of defense.”
The first line is the business, meaning that business actors have to take responsibility for compliance as part of their activities on the “front line” of risky business interactions. This makes sense – the business actor has the risky interaction with the foreign government official, the healthcare professional, or possibly a competitor in the same industry. To the extent the business actor owns the compliance function, he or she can protect the company by avoiding risky interactions or navigating the risks to avoid potential problems.
The second line of defense is the compliance and legal functions that operate to ensure that the company complies with the law and the company’s code of conduct. Compliance professionals promote employee reporting through hotlines and other mechanisms to learn about specific activities that may raise compliance risks. Similarly, legal officers have to analyze legal risks and provide guidance and documentation to mitigate those risks.
Finally, the third line of defense is the auditing function that carries out post hoc reviews of business conduct to make sure that internal controls are operating effectively. To the extent the internal auditor identifies weaknesses in the business’ operations, the auditor sets out remediation requirements and then enforces deadlines to implement specific solutions prescribed by the auditor.
The three lines of defense is all well and good in explaining compliance program operations. But words matter in the compliance arena (and many other arenas as well). We cannot ignore the fact that the so-called three lines are built on defense. A compliance system, in today’s environment, is not a defense, and it should not be characterized as a defensive function.
To the contrary, ethics and compliance is an offensive strategy. If you consider that ethics and compliance is fundamental to the company’s culture and its values and principles, a compliance program is a proactive means by which to instill a set of values and behavioral norms for the board, senior executives, managers and employees.
In the same way that a company establishes its corporate structure, mission, innovative product and/or service, and overall business plan, the company’s ethics and compliance program should be designed and baked into the initial formulation of the company.
A company has to answer basic questions about its corporate culture when it first is created: What is our objective? What is our plan? What kind of company do we want to create?
These basic questions require consideration of the company’s culture, and this is where ethics and compliance can help to develop basic behavioral norms – how do we want to conduct ourselves? How will we interact with others outside the company? What is our culture and how will we implement it?
If we start with a company’s culture and what is expected, other pieces of the compliance puzzle fall into place. In this model, the compliance function will play an important role in creating and monitoring the company’s culture. The human resources function will be an important partner in this effort. A system starting with culture will quickly fall into place.
Corporate values and principles are relatively easy to translate into compliance functions. A company committed to trust and excellence, for example, would not bribe anyone for business but would compete for contracts and engagements with customers. Trust would become a selling point within the organization and to its customers, third parties and other constituents.
Taking a defensive approach and turning it into offense is an easy way to ensure that compliance is allocated a seat at the business table where it can demonstrate the competitive advantage to compliance, the importance of culture, and the translation of such principles into marketplace success.

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COMM_a26U.S. Administration Exempts DDTC from Limit on New Regulations

(Source: Editor)
Mr. Brian Nilsson, Deputy Assistant Secretary of State for Defense Trade Controls, stated at the public meeting of the Defense Trade Advisory Group (DTAG) today in Washington, DC, that DDTC is exempt from the Administration’s limit on new regulations, so plans are continuing to issue new or revised regulations this year for the following subjects:
  – Defense services
  – Public domain
  – Technical data
  – Fundamental research
  – ITAR 126.4 exemption
  – US persons abroad – registration and licensing requirements
DDTC welcomes public suggestions for amendments of the International Traffic in Arms Regulations, and for DDTC operations such as the website format, and agency training and outreach. Submit them to

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COMM_a37Gary Stanley’s ECR Tip of the Day

(Source: Defense and Export-Import Update; available by subscription from
* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059,

Under the EAR, second incorporation is a policy determination by BIS that occurs when a U.S.origin controlled item is incorporated into a nonU.S.origin item outside of the U.S. and then that nonU.S. item, being a discrete product, is incorporated into another nonU.S. item outside the United States. The second incorporation rule cannot be applied to 600 series U.S. origin content or U.S. origin seethrough carveout items. A discrete product is a nonU.S.made product that is not specifically designed for the nonU.S. item in which it is going to be incorporated. Discrete items are sold by catalog or online to other buyers. Also, the buyer does not participate in the design of a nonU.S.made discrete product. 

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8. ECTI Presents Making Lemonade out of Consent Agreements Webinar, 9 May 

(Source: Danielle McClellan,
* What: Making Lemonade out of Consent Agreements
* When: May 9, 2017; 1:00 p.m. (EDT)
* Where: Webinar
* Sponsor: Export Compliance Training Institute (ECTI)
* ECTI Speakers: Randall Cook and Rosanne Giambalvo
* Register:
Here or contact Danielle McClellan, 540-433-3977,

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(Source: Editor)

* Vincent Van Gogh (Vincent Willem van Gogh, 30 Mar 1853 – 29 Jul 1890, was a Dutch Post-Impressionist painter who is among the most famous and influential figures in the history of Western art. In just over a decade he created about 2,100 artworks, including around 860 oil paintings, most of them in the last two years of his life in France, where he died. His suicide at 37 followed years of mental illness and poverty.)

  – “Great things are done by a series of small things brought together.”
* Maimonides (Rabbi Moses ben Maimon, commonly known as Maimonides, 30 Mar 1135 or 1138 – 12 Dec 1204, was a medieval Sephardic Jewish philosopher who became one of the most prolific and influential Torah scholars of the Middle Ages. In his time, he was also a preeminent astronomer and physician)
  – “The risk of a wrong decision is preferable to the terror of indecision.”

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. Are Your Copies of Regulations Up to Date?
(Source: Editor)

The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register.  Changes to applicable regulations are listed below.
: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War
  – Last Amendment: 15 Jan 2016: 81 FR 2657-2723: Machineguns, Destructive Devices and Certain Other Firearms; Background Checks for Responsible Persons of a Trust or Legal Entity With Respect To Making or Transferring a Firearm 
: 19 CFR, Ch. 1, Pts. 0-199
  – Last Amendment: 27 Jan 2017: 82 FR 8589-8590: Delay of Effective Date for Importations of Certain Vehicles and Engines Subject to Federal Antipollution Emission Standards [New effective date: 21 March 2017.]; and 82 FR 8590: Delay of Effective Date for Toxic Substance Control Act Chemical Substance Import Certification Process Revisions [New effective date: 21 March 2017.]

  – Last Amendment: 18 May 2016: Change 2: Implement an insider threat program; reporting requirements for Cleared Defense Contractors; alignment with Federal standards for classified information systems; incorporated and canceled Supp. 1 to the NISPOM  (Summary here.)

  – Last Amendment: 

29 Mar 2017: 82 FR 15461-15463: Removal of Certain Persons From the Entity List; and 82 FR 15458-15461: Removal of Certain Persons From the Entity List; Addition of a Person to the Entity List; and EAR Conforming Change.   

: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
  – Last Amendment: 10 Feb 2017: 82 FR 10434-10440: Inflation Adjustment of Civil Monetary Penalties.  
: 15 CFR Part 30
  – Last Amendment: 15 May 2015; 80 FR 27853-27854: Foreign Trade Regulations (FTR): Reinstatement of Exemptions Related to Temporary Exports, Carnets, and Shipments Under a Temporary Import Bond 
  – HTS codes that are not valid for AES are available
  – The latest edition (9 Mar 2016) of Bartlett’s Annotated FTR (“BAFTR”), by James E. Bartlett III, is available for downloading in Word format. The BAFTR contains all FTR amendments, FTR Letters and Notices, a large Index, and footnotes containing case annotations, practice tips, and Census/AES guidance.  Subscribers receive revised copies every time the FTR is amended. The BAFTR is available by annual subscription from the Full Circle Compliance website.  BITAR subscribers are entitled to a 25% discount on subscriptions to the BAFTR.
, 1 Jan 2017: 19 USC 1202 Annex. (“HTS” and “HTSA” are often seen as abbreviations for the Harmonized Tariff Schedule of the United States Annotated, shortened versions of “HTSUSA”.)

  – Last Amendment: 7 Mar 2017: Harmonized System Update 1702, containing 1,754 ABI records and 360 harmonized tariff records. 

  – HTS codes for AES are available
  – HTS codes that are not valid for AES are available
  – Latest Amendment: 11 Jan 2017: 82 FR 3168-3170: 2017 Civil Monetary Penalties Inflationary Adjustment
 – The only available fully updated copy (latest edition 8 Mar 2017) of the ITAR with all amendments is contained in Bartlett’s Annotated ITAR (“BITAR”), by James E. Bartlett III.  The BITAR contains all ITAR amendments to date, plus a large Index, over 750 footnotes containing case annotations, practice tips, DDTC guidance, and explanations of errors in the official ITAR text.  Subscribers receive updated copies of the BITAR in Word by email, usually revised within 24 hours after every ITAR amendment.  The BITAR is available by annual subscription from the Full Circle Compliance
.  BAFTR subscribers receive a 25% discount on subscriptions to the BITAR, please
contact us
to receive your discount code.  

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* The Ex/Im Daily Update is a publication of FCC Advisory B.V., edited by James E. Bartlett III and Alexander Bosch, and emailed every business day to approximately 8,000 subscribers to inform readers of changes to defense and high-tech trade laws and regulations. We check the following sources daily: Federal Register, Congressional Record, Commerce/AES, Commerce/BIS, DHS/CBP, DOJ/ATF, DoD/DSS, DoD/DTSA, State/DDTC, Treasury/OFAC, White House, and similar websites of Australia, Canada, U.K., and other countries and international organizations.  Due to space limitations, we do not post Arms Sales notifications, Denied Party listings, or Customs AD/CVD items.

* RIGHTS & RESTRICTIONS: This email contains no proprietary, classified, or export-controlled information. All items are obtained from public sources or are published with permission of private contributors, and may be freely circulated without further permission. Any further use of contributors’ material, however, must comply with applicable copyright laws.

* CAVEAT: The contents cannot be relied upon as legal or expert advice.  Consult your own legal counsel or compliance specialists before taking actions based upon news items or opinions from this or other unofficial sources.  If any U.S. federal tax issue is discussed in this communication, it was not intended or written by the author or sender for tax or legal advice, and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing, or recommending to another party any transaction or tax-related matter.

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